| (a) Definitions. The following words and terms, when
used in this section, shall have the following meanings, unless the
context clearly indicates otherwise.
(1) Chapter 160 boat--A vessel not more than 115 feet
in length, measured from the tip of the bow in a straight line to
the stern, that is not a canoe, kayak, rowboat, raft, punt, inflatable
vessel, or other watercraft designed to be propelled by paddle, oar,
or pole, and that is subject to tax under Tax Code, Chapter 160 (Taxes
on Sales and Use of Boats and Boat Motors).
(2) Commercial vessel--A vessel that displaces eight
or more tons of fresh water before being loaded with fuel, supplies,
or cargo, and that is:
(A) used exclusively and directly in a commercial or
business enterprise or activity, including, but not limited to, commercial
fishing; or
(B) used commercially for pleasure fishing by individuals
who are paying passengers.
(3) Consumable supplies--Tangible personal property
that is used by a service provider to repair, remodel, maintain, or
restore tangible personal property belonging to another; is not transferred
into the care, custody, and control of the purchaser of the service;
and, having been used once for its intended purpose, is completely
used up or destroyed. Examples of consumable supplies include, but
are not limited to, canned air used to remove dust from equipment
and solvents used to clean equipment parts.
(4) Extended warranty or service policy--A contract
sold to the purchaser of tangible personal property for an amount
in addition to the charge for the tangible personal property, or sold
to an owner of tangible personal property, to extend the terms of
the manufacturer's written warranty or provide a warranty in addition
to or in place of the manufacturer's written warranty.
(5) Fabricate--To make, build, create, produce, or
assemble components of tangible personal property, or to make tangible
personal property work in a new or different manner.
(6) Maintain--To perform maintenance.
(7) Maintenance--Work performed on operational and
functioning tangible personal property that is necessary to sustain
or support safe, efficient, continuous operation of the tangible personal
property, or is necessary to keep the tangible personal property in
good working order by preventing decline, failure, lapse, or deterioration.
(8) Manufacturer's written warranty--A manufacturer's
guarantee made for no additional charge to the purchaser of an item
of tangible personal property that the item is operable and will remain
operable for a specified period of time.
(9) Processing--The physical application of the materials
and labor necessary to modify or to change the characteristics of
tangible personal property. The repair of tangible personal property,
belonging to another, by restoring it to its original condition is
not considered processing of the tangible personal property. The mere
packing, unpacking, or shelving of tangible personal property to be
sold is not considered to be processing of the tangible personal property.
Processing does not include remodeling.
(10) Remodel--To modify or remake tangible personal
property belonging to another in a similar but different manner, or
to change the style, shape, or form of tangible personal property
belonging to another, without causing a loss of its identity or without
causing it to operate in a new or different manner. Remodeling does
not include processing.
(11) Repair--To mend or restore to working order or
operating condition tangible personal property that was broken, damaged,
worn, defective, or malfunctioning.
(12) Restore--To return tangible personal property
that is still operational and functional, but that has faded, declined,
or deteriorated, to its former or original state.
(13) Service provider--A person who repairs, remodels,
maintains, or restores tangible personal property belonging to another.
(14) Vessel--A watercraft, other than a seaplane on
water, used, or capable of being used, for navigation and transportation
of persons or property on water. The term includes a ship, boat, watercraft
designed to be propelled by paddle or oar, barge, and floating dry-dock.
(15) Warrantor--A person who has a contractual obligation
for a specified period of time to repair, remodel, maintain, or restore
tangible personal property belonging to another.
(b) Taxability of services to repair, remodel, maintain,
or restore tangible personal property.
(1) General rule. Except as otherwise provided in this
section, service providers who repair, remodel, maintain, or restore
tangible personal property belonging to another are providing taxable
services. A service provider is a seller and must obtain a sales and
use tax permit and collect and remit sales and use tax as provided
in §3.286 of this title (relating to Seller's and Purchaser's
Responsibilities). Sales or use tax is due from the purchaser on the
entire charge for a service to repair, remodel, maintain, or restore
tangible personal property, including any separately stated charge
for materials, parts, labor, consumable supplies, or equipment. In
addition, the purchaser owes sales or use tax on any charge connected
to the taxable service, including separately stated charges for inspecting,
monitoring, or testing.
(A) Aircraft. Service providers who repair, remodel,
maintain, or restore aircraft should refer to §3.280 of this
title (relating to Aircraft).
(B) Motor vehicles. Service providers who remodel motor
vehicles are providing taxable services and are covered by this section.
Service providers who repair, maintain, or restore motor vehicles
should refer to §3.290 of this title (relating to Motor Vehicle
Repair and Maintenance; Accessories and Equipment Added to Motor Vehicles;
Moveable Specialized Equipment).
(C) Vessels. Service providers who repair, remodel,
maintain, or restore a vessel that is a Chapter 160 boat, sports fishing
boat, or any other boat used for pleasure, and that is not a commercial
vessel, are providing taxable services and are covered by this section.
Service providers who repair, remodel, maintain, or restore commercial
vessels should refer to §3.297 of this title (relating to Carriers,
Commercial Vessels, Locomotives and Rolling Stock, and Motor Vehicles).
(D) Locomotives and rolling stock. Service providers
who repair, remodel, maintain, or restore locomotives or rolling stock
should refer to §3.297 of this title.
(E) Exempt equipment. A service to repair, remodel,
maintain, or restore tangible personal property that, if sold, leased,
or rented at the time the service is performed, would be exempt under
Tax Code, Chapter 151 (Limited Sales, Excise, and Use Tax) due to
its nature or its use is exempt from sales and use taxes. Tax is due
on the sale of services to repair, remodel, maintain, or restore tangible
personal property that was exempt at the time of purchase but would
not be exempt at the time the service is performed. For example, services
to repair, remodel, maintain, or restore the following tangible personal
property will not qualify for exemption based solely on the fact that
such tangible personal property was exempt at the time of its purchase:
(i) tangible personal property purchased from an organization
exempted from paying sales or use tax under Tax Code, §151.309
(Governmental Entities) or §151.310 (Religious, Educational,
and Public Service Organizations);
(ii) tangible personal property exempted from use tax
because sales tax was paid on the purchase;
(iii) tangible personal property acquired tax-free
in a transaction qualifying as an occasional sale under Tax Code, §151.304
(Occasional Sales), or as a joint ownership transfer exempted under
Tax Code, §151.306 (Transfers of Common Interests in Property).
See §3.316 of this title (relating to Occasional Sales; Transfers
Without Change in Ownership; Sales by Senior Citizens' Organizations;
Sales by University and College Student Organizations; and Sales by
Nonprofit Animal Shelters) and §3.331 of this title (relating
to Transfers of Common Interests in Tangible Personal Property; Intercorporate
Services); or
(iv) tangible personal property purchased tax-free
during a sales tax holiday as provided by §3.353 of this title
(relating to Sales Tax Holiday--Certain Emergency Preparation Supplies), §3.365
of this title (relating to Sales Tax Holiday--Clothing, Shoes and
School Supplies) or §3.369 of this title (relating to Sales Tax
Holiday--Certain Energy Star Products, Certain Water-Conserving Products,
and WaterSense Products).
(2) Resale certificates.
(A) A service provider may issue a properly completed
resale certificate instead of paying sales or use tax on the purchase
of tangible personal property that is integral to repairing, remodeling,
maintaining, or restoring tangible personal property belonging to
another and is transferred to the care, custody, and control of the
purchaser of the taxable service. See §3.285 of this title (relating
to Resale Certificate; Sales for Resale).
(B) A person holding tangible personal property for
sale, lease, or rental may issue a properly completed resale certificate
in lieu of paying sales or use tax on the purchase of labor and tangible
personal property used to repair, remodel, maintain, or restore that
tangible personal property. Refer to §3.285 of this title and §3.294
of this title (relating to Rental and Lease of Tangible Personal Property).
(3) A service provider working under an agreement that
provides that the purchaser of the service will furnish the tangible
personal property required for the service must collect sales or use
tax on the charge for the service.
(4) A service provider may accept a properly completed
exemption certificate instead of collecting sales or use tax when
performing a taxable service for a purchaser who is exempt from sales
and use tax under Tax Code, Chapter 151, or when performing services
on tangible personal property that is exempt from sales and use tax.
Refer to §3.287 of this title (relating to Exemption Certificates).
(c) Consumable supplies and equipment. Sales or use
tax must be paid by the service provider on consumable supplies and
equipment that are purchased for use in the performance of a service
that are not transferred to the care, custody, and control of the
customer.
(d) Warranties. For information on warranties for the
repair of motor vehicles, refer to §3.290 of this title. For
information concerning warranties for the repair of aircraft, refer
to §3.280 of this title.
(1) Manufacturer's written warranty or recall campaign.
No sales or use tax is due on tangible personal property or labor
furnished by the manufacturer to repair tangible personal property
under a manufacturer's written warranty or recall campaign.
(A) Records must be kept by the service provider to
document that the service and tangible personal property were used
in repairing an item under a manufacturer's written warranty or recall
campaign.
(B) The service provider may purchase tangible personal
property to be used in repairs under a manufacturer's written warranty
or recall campaign tax-free by issuing an exemption certificate to
the seller.
(2) Extended warranty or service policy.
(A) Sales or use tax is due on the sale of an extended
warranty or service policy.
(B) The warrantor may issue a resale certificate in
lieu of paying sales or use tax on the purchase of taxable items used
in performing the services covered by the contract as long as the
taxable items are integral to performing the service and the taxable
items are also transferred to the care, custody, and control of the
purchaser. Refer to §3.285 of this title.
(C) If the warrantor uses a third-party service provider
to perform the service, the third-party service provider may accept
a resale certificate from the warrantor in lieu of sales or use tax.
(D) The warrantor must collect sales or use tax on
any charge to the purchaser for labor or tangible personal property
not covered by the extended warranty or service policy.
(E) If the warrantor uses a third-party service provider
to fulfill the warranty and the service provider charges the warrantor
or the purchaser for tangible personal property or labor not covered
under the warranty, the service provider must collect sales or use
tax on such charges.
(3) Replacements and reimbursements.
(A) Trade-in. If the warrantor is a seller of tangible
personal property, and if the terms of a manufacturer's or extended
warranty agreement provide for either the replacement or the repair,
remodeling, maintenance, or restoration of tangible personal property,
then tangible personal property accepted by the warrantor under the
terms of the warranty in exchange for, or towards the purchase of,
tangible personal property of the type sold by the warrantor in the
regular course of business will be considered a trade-in. The provisions
of Tax Code, §151.007(c)(5) ("Sales Price" or "Receipts") apply
to such a transaction and any amount or credit provided for the trade-in
reduces the taxable amount of the sale of the replacement item.
Cont'd... |
